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“Selling Licenses for a Process Innovation: The Impact of the Product Market on the Selling Mechanism
Canadian Journal of Economics (2008)
  • Aniruddha Bagchi, Kennesaw State University
This article considers the sale by a research lab of licences for a cost-reducing innovation. The marginal cost of a firm that wins a licence is private information and the acquisition of a licence imposes a negative externality on the other firms. The lab’s optimal revenue is determined from a class of mechanisms in which the lab selects the number of licences and the reserve price before the sale. The role of the downstream product market in the determination of the number of licences is analyzed. Furthermore, it is also shown that the optimal reserve price may be zero.
  • Auctions,
  • Posted Price,
  • Licenses,
  • Externalities
Publication Date
Publisher Statement
The definitive version is available at A previous version of this paper was circulated as "How to Commercialize Technology Using Auctions."
Citation Information
Bagchi, A. 2008. Selling licenses for a process innovation: The impact of the product market on the selling mechanism. Canadian Journal of Economics 41(3): 1015-1045.